IPB Petroleum Insiders May Regret Not Buying More, Market Cap Hits AU$6.2m
IPB Petroleum Limited (ASX:IPB) insiders who bought shares over the past year were rewarded handsomely last week. The stock rose 17%, resulting in a AU$888k rise in the company’s market capitalisation, translating to a gain of 12% on their initial investment. In other words, the original AU$417.2k purchase is now worth AU$466.9k.
While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, we would consider it foolish to ignore insider transactions altogether.
Over the last year, we can see that the biggest insider purchase was by insider Martin Rowney for AU$180k worth of shares, at about AU$0.0072 per share. So it’s clear an insider wanted to buy, even at a higher price than the current share price (being AU$0.007). It’s very possible they regret the purchase, but it’s more likely they are bullish about the company. We always take careful note of the price insiders pay when purchasing shares. It is generally more encouraging if they paid above the current price, as it suggests they saw value, even at higher levels. Notably Martin Rowney was also the biggest seller.
Over the last year, we can see that insiders have bought 66.70m shares worth AU$417k. But they sold 11.20m shares for AU$118k. In total, IPB Petroleum insiders bought more than they sold over the last year. The average buy price was around AU$0.0063. We don’t deny that it is nice to see insiders buying stock in the company. But we must note that the investments were made at well below today’s share price. The chart below shows insider transactions (by companies and individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!
See our latest analysis for IPB Petroleum
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of undervalued small cap companies that insiders are buying.
There was some insider buying at IPB Petroleum over the last quarter. In total, insiders bought AU$187k worth of shares in that time. However, insider Martin Rowney netted AU$118k for sales. While it’s good to see the insider buying, the net amount bought isn’t enough for us to gain much confidence from it.
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. We usually like to see fairly high levels of insider ownership. IPB Petroleum insiders own about AU$2.7m worth of shares (which is 44% of the company). I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.
The recent insider purchases are heartening. And an analysis of the transactions over the last year also gives us confidence. But on the other hand, the company made a loss during the last year, which makes us a little cautious. When combined with notable insider ownership, these factors suggest IPB Petroleum insiders are well aligned, and quite possibly think the share price is too low. One for the watchlist, at least! So these insider transactions can help us build a thesis about the stock, but it’s also worthwhile knowing the risks facing this company. Case in point: We’ve spotted 5 warning signs for IPB Petroleum you should be aware of, and 4 of them are significant.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.
For the purposes of this article, insiders are those individuals who report their transactions to the relevant regulatory body. We currently account for open market transactions and private dispositions of direct interests only, but not derivative transactions or indirect interests.
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